Vital Signs: A Tiger in the Economy’s Tank

While all the focus is on the government shutdown’s potential cut into economic activity, one positive development has slipped into the outlook. Cheaper gasoline should provide a lift to consumer finances.

Gasoline prices fell throughout most of the third quarter, to about $3.50 a gallon at the end of September, says the U.S. Department of Energy. The decline contrasts with an increasing trend at the same time last year.

According to AAA’s measure of fuel costs, prices fell further in the first week of October and could drop another 25-30 cents through December, barring any unexpected refinery problems or higher oil costs.

Economists at the Royal Bank of Canada say if prices can stay low at about $3.30 a gallon this quarter, the price cut could translate to an extra $30 billion (at an annual rate) that consumers can spend elsewhere, offsetting the potential drag from a protracted shutdown.

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